The founders of cryptocurrency lender Hodlnaut, which has been facing financial difficulties, have proposed selling the business as a better option for creditors than liquidating the firm, according to a recent affidavit by Hodlnaut co-founder Simon Lee.
The move comes as the firm’s creditors have rejected a proposed restructuring plan and are seeking to liquidate the platform’s assets.
Hodlnaut, which has operations in Singapore and Hong Kong, halted withdrawals in August 2022 and was granted protection from creditors. It was one of several crypto lenders worldwide that hit trouble in last year’s digital-asset rout.
Lee and Hodlnaut’s other co-founder, Zhu Juntao, have apparently reached out to several potential white knight investors, according to a report by Bloomberg.
Lee stated in the affidavit that the co-founders believe the Hodlnaut user base can be acquired and on-boarded on digital-asset platforms owned or affiliated with such investors. He argued that this would “maximize” value for creditors.
Creditors reject Hodlnaut restructuring plan
The group of creditors rejected a restructuring plan offer allowing the current directors to oversee the firm’s operations during the restructuring phase. However, a Jan. 12 hearing rejected an application to remove the interim judicial managers.
The creditors believe restructuring plans are of no help and it is in their best interest to wind down and liquidate the firm’s remaining assets.
Algorand Foundation, one of Hodlnaut’s key creditors, called for immediate liquidation and distribution of remaining assets among creditors to maximize the remaining value.
Hodlnaut had downplayed its exposure to crypto fugitive Do Kwon’s collapsed Terra digital-token ecosystem, but in reality, the firm suffered a near-$190 million loss. The executives later deleted thousands of documents related to their investments to hide their exposure.
Attempts to save the business
Despite the challenges faced by Hodlnaut, Lee, and Juntao remain optimistic that the firm can be saved. They have proposed selling the business to potential investors as a way to maximize value for creditors.
While the co-founders’ proposal is surprising, it may be a viable option for the troubled crypto lender.
The move to sell the business to potential investors comes after months of uncertainty and financial difficulties for Hodlnaut. The firm’s interim judicial managers have been working to assess the rehabilitation prospects of the company and have provided regular updates to the court and creditors.
It remains to be seen whether Hodlnaut’s creditors will accept the co-founders’ proposal to sell the business. The crypto lender’s financial troubles highlight the risks and challenges associated with investing in digital assets.
Despite the challenges, the crypto industry is continuing to grow and evolve, with new innovations and investment opportunities emerging.
